To Boost Rooftop Solar, Malloy Offers Plan Betting Ratepayer Millions

NEW BRITAIN — Surrounded by solar panel crews, energy officials and students at E.C. Goodwin Technical High School, Gov. Dannel P. Malloy on Tuesday proposed an ambitious bet to grow by tenfold the use of rooftop solar in Connecticut.

The governor's plan would give the Connecticut Green Bank, a quasi-public agency, the ability to raise large sums of money through agreements with the state's two major power utilities, United Illuminating and Eversource Energy, formerly Connecticut Light & Power.

Proceeds would replenish the agency's solar subsidy accounts. While the value of subsidies will remain the same, if not fall, in coming years, the boost in funds would grant the Connecticut Green Bank the ability to subsidize more projects.

In the balance, though, are tens of millions of dollars of ratepayer dollars that could be saved or lost depending on the future performance of clean energy markets, a territory that carries its usual share of surprises.

The plan, which requires legislation, follows a doubling of the state's installed solar facilities in the past few years to 30 megawatts and serves as a platform for the governor to call for 300 megawatts installed by 2022.

It also responds to a standing criticism that Connecticut imports as much as 95 percent of its clean energy when much could be done to develop in-state renewable projects.

"We have been buying solar energy but largely from out of state," Malloy said in presenting his plan Tuesday. "This plan furthers our commitment to achieve our broader energy, environmental and economic development goals and do it with facilities here in Connecticut."

In a statement, Connecticut Green Bank President Bryan Garcia said the governor's proposal "will allow us to continue deploying clean energy in our communities through local contractors who do the installations, local lenders who provide the capital, and customers who benefit from cleaner and cheaper energy."

Solar panels, wind farms, fuel cells or other clean-energy projects all create two resources: power and renewable energy credits. The electricity is either used on-site or banked to a customer's account, while the renewable energy credits are sold into a market where large power companies make purchases to comply with the state's clean-energy goals.

Currently, when the Connecticut Green Bank offers a subsidy for a residential solar installation, the resident signs over to the bank the rights any to the renewable energy credits the project creates. The Green Bank sells the credits to raise money for more subsidies.

But the expansion of solar in Connecticut is testing the Connecticut Green Bank's abilities to keep up. In a report about the new solar program, the green bank said, "the current level of residential solar growth in Connecticut cannot be sustained" in the way it currently funds its subsidies.

The answer that Malloy and his energy officials arrived at is the Solar Home Renewable Energy Credit, or SHREC, pronounced exactly like the ogre-themed Dreamworks movies. In the plan, the green bank will package up 15-years worth of rights to renewable energy credits from numerous solar panel installations and sell that source of income as a security to the state's power utilities.

The sale is where it gets complicated. The Green Bank will sell the renewable energy credits to the utilities at a set price for the 15 years. The utilities will turn around and sell the credits on the open market.

The result: If Eversource Energy uses ratepayer money to buy 1,000 credits for $50 apiece from the Green Bank and sells them for $55 apiece on the market, ratepayers make $5,000. But if the market price drops to $45 for the credits, then ratepayers lose $5,000.

Connecticut's Green Bank hired a consultant to crunch these numbers, for eight offerings of 15-year purchase agreements, and compared those costs to the likely price the utilities can sell the credits for on the market. The outcomes range from ratepayers making $68 million to ratepayers losing $51 million.

The consultant, Sustainable Energy Advantage, wrote in a footnote that the numbers were conservative because recent news that Eversource Energy and National Grid pulled out of their contracts with Cape Wind will likely reduce the supply of renewable energy credits in the market. This would increase the price at which that the utilities would be able to resell the credits.

The consultant report also said that gains could be higher for ratepayers if the utilities resold the credits into the Massachusetts market for energy credits rather than the Connecticut market because prices there tend to be higher.